The rent is too d@&* high! How to budget for life in a new place.

In a couple of months, my family is moving across the country to a city where the cost of living is sky-high compared to where we live now.  I used a cost-of-living calculator to estimate the difference in incomes needed for the same standard of living.  This Bankrate.com calculator shows that we would have to increase our income by almost 60%!  

That means that if we make $50,000 in our current location, we would have to make $80,000 to be able to purchase the same "stuff" in our new city.  If we make $100,000, we would have to make $160,000.  I looked at the details of the Bankrate.com results and it showed that everything (except for a trip to the salon, which I do about twice a year) likely costs more in our new city.  Housing is the worst offender at about 2 times what it costs where we are now. Ouch!  Jimmy McMillan, do you have my back on this one?

Image: Politico.com

Image: Politico.com

So what's a woman with a plan to do?  Make a plan!  That's right, this planner extraordinaire made creating a new budget her first item of business once we realized we were moving.  Whenever you have a significant and known life-event coming up that will affect your budget, it is important to be proactive and build out your anticipated budget with as much information as possible.  Here's what I did.

  1. I created a spreadsheet in Google Drive (it's free and easy to share docs and collaborate with others) and duplicated my normal budget items in it.  I keep my active budget in Mint.com
  2. I filled in items that are location-neutral fixed costs first (costs that don't change much from month-to-month or place-to-place such as our tithe, life insurance, college savings, cell phone bills, etc.).  
  3. Then I knocked out the location-dependent fixed costs such as internet service and average utility bills.   It's not an exact science, but you can find out pretty close estimates by either googling up some message boards for where you are moving to or just figuring out what providers are in your new area and getting quotes from them.
  4. Next came the big ticket items.  In our case it's housing and childcare.  After doing some extensive online research and contacting a couple of realtors and childcare providers, I flew to our new city (using a free ticket from my frequent flyer miles account) for a three-day stint to scout out possibilities.  There weren't many options given some of our family's constraints (it seems that dogs, for example, aren't super welcome in seemingly 95% of rentals*), so we took what we could get.  Our housing will be about 28% of our gross monthly salary, which will be a hard check to write as we currently don't have a mortgage or rent to pay.  The one bright side is that childcare is about what I expected it to be, and won't be significantly more than what we are paying now.
  5. After accounting for all of this, we built in some small entertainment and personal expense budgets and the rest is going to our investment plans.  

We won't be able to invest as much as we are used to and if we don't increase our income or decrease our housing expenses, my 5 year plan will be derailed.  But guess what?  I have a plan for that as well!  Stay tuned.

*Why are we renting when we have so much in non-retirement funds?  I'll explain that in a later post, but I have Dave Ramsey to blame for that.  (Thanks, Dave!)